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10/22/2012

Ouch…can you say trouble in Tech land?

Last Thursday, the surprise early release of Google numbers caught the markets by surprise as the noteworthy earnings miss sent shock waves through tech land.  Friday involved heavy follow through as Housing data put pressure on the non-tech sector as well. 

So why the massive fallout for the Tech heavy Nasdaq from one negative earnings release for one of its players?  That’s just it…much of the impressive up-move for the NASDAQ in 2012 was a function of just that (a few big players).  The rest of the wild bunch consists of IBM, Apple and a few others.  So a big hit to one of the core spelled near chaos for the index.

So what was the problem with Google’s numbers?  One particular negative came from the reported 15% drop in cost per click…a prime metric that measures what Google paid advertisers pay per click.  And why the big negative for the pay per click metric?  Well, what Google may be experiencing is the quickly growing advertising alternatives that companies can choose from when considering their $budget for advertising.  One particular tactic is the new “app” offers to consumers while others include social media plays.  Hey…that’s just the information technology economy continuing to evolve.

The other big problem for the NASDAQ is the significant amount of pure speculation in the sector.  The long term technical bull indicator for the QQQ pointed to the mid 70s which kept many players long the sector.  However, last week’s price decline may just bring this bubbled up index back to earth and shake up some speculative bulls.  Keep those seatbelts fastened.  I think I heard that somewhere before.

 

Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR

 

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